Nigeria to improve power grid system with $750m World Bank loan
Nigeria has listed priority areas that will help improve her power grid system after the World Bank Group approved a loan of $750million to boost the Country’s power sector.
World Bank notes that Nigeria has the world’s largest absolute electricity access deficit and the lack of access to the electricity grid affects 45 per cent of the population 90 million people.
The loan with project ID P174622 was approved on June 9, 2023.
The money is the first World Bank loan approved under the new administration of President Bola Tinubu, BAT.
The loan is additional financing for the Power Sector Recovery Performance-Based Operation, which was first approved on June 23, 2020.
In a document published on May 19 titled ‘Nigeria – Power Sector Recovery Performance Based Operation Project: Additional Financing (English)’, it was indicated that the parent project will end on June 30, 2023.Out of the $750million initially approved in 2020, only 72 per cent financing of $535.09million was disbursed, with the balance expected by June 30, 2023, for the parent project.
In addition the approved additional financing, International Bank for Reconstruction and Development will provide $449million, and International Development Association will provide $301million.
The International Development Association and the International Bank for Reconstruction and Development, which make up the World Bank, have, over the years, advanced loans to Nigeria.
The IBRD lends to governments of middle-income and creditworthy low-income countries, while the IDA provides concessionary loans – called credits – and grants to governments of the poorest countries.
According the Bank, “This Program Paper seeks the approval of the Board of Executive Directors to provide Additional Financing to the Federal Republic of Nigeria, through an International Development Association credit in the amount of $301milion and an International Bank for Reconstruction and Development loan in the amount of $449million to the Power Sector Recovery Performance-Based Operation (PSRO, P164001).
“The proposed AF will build on the tangible results achieved and lessons learned under the parent Program. The proposed AF will continue supporting the implementation of the FGN’s Power Sector Recovery Plan’s critical actions to address the next set of power sector challenges and facilitate the achievement of the FGN’s ambitious access and energy transition targets.”
The document further disclosed that the new financing would run from 2023 to June 30, 2027
The Bank notes that, “Nigeria has the world’s largest absolute electricity access deficit. Lack of access to the electricity grid affects 45 per cent of the population (90 million people), making Nigeria the country with the largest number of people not connected to electricity.
“As such, Nigeria accounts for 12 per cent of the global access deficit. Large disparities exist in access to electricity between urban areas (84 per cent) and rural ones (26 per cent). The net access deficit has increased by over seven million citizens over the last decade, as the pace of population growth has overtaken the pace of electrification.
“Even those Nigerians who are connected to the grid face frequent outages and hence do not get reliable supply.”
The document placed economic loss from poor electricity supply at $25billion annually, with firms saying that it is a major business challenge.
“Economic losses from unreliable electricity supply are estimated to be around N7-10 trillion ($25billion equivalent) annually, or 5-7 per cent of GDP. Firms cite a lack of reliable electricity as the top constraint to their business.
“Faced with unreliable and insufficient supply, businesses and households fill the gap with expensive petrol and diesel-run generators. It is estimated that over 20 GW of gasoline generator capacity is employed by households and small businesses, nearly twice as much as the 12 GW capacity connected to the national grid.
“Over 22 million diesel/gasoline generators power about 26 per cent of total households and 30 per cent of micro, small and medium-sized enterprises (MSMEs) in Nigeria,” the Bank added.
